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A Call to Action for Real Financial Reform

April 8, 2009

AFFIL and 130 other groups signed onto this “Call to Action” (PDF) regarding the large-scale regulatory reform needed to get the economy back on track.  The Call to Action references the framework introduced in the “Special Report on Regulatory Reform” by the Congressional Oversight Panel (COP).  COP is chaired by Elizabeth Warren, and you can watch a video of her explaining the report here.  As usual, her explanation is colorful and easy to understand.

The Call to Action speaks about re-regulating the economy to protect investors and workers as well as consumers.  For reform ideas focused specifically on consumer protection, see AFFIL’s own principles regarding re-regulation, and for a somewhat overlapping set of ideas, see the Obama Administration’s principles to guide re-regulation.

Our Partner the Consumer Federation of America (CFA) also recently released a 100-page analysis of the financial crisis and recommends — guess what — sound prudential regulation.  (See the full report here (PDF) and an Issue Brief here (PDF).)

The analysis takes aim at “Market fundamentalism,” or the belief that “the pursuit of private interest through unregulated markets is all we need to promote the public good, because markets inevitably create efficiency, growth, and stability.”  This idea took root in the 1980s, which marked the beginning of an era of deregulation.  Deregulatory zeal culminated in the current economic crisis we’re facing.  As such, the authors conclude:

The overarching conclusion we reach, based on our analysis, is that we do not need a new, New Deal. Nor do we need to resort to some radical, untried experiment to solve our financial problems. Market fundamentalism was the radical experiment that pushed deregulation much too far in the financial sector. To cure its excesses, we need to rediscover the pragmatic, progressive values of the original New Deal. We need to return to the principles and restore the institutions of New Deal prudential regulation.  [Emphasis added.]

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